Real Estate Law Article: What to Expect When Applying For HAMP
For the last couple years I have helped homeowners modify their home loans through the Home Affordable Modification Program or HAMP. I have helped homeowners who are far behind on their mortgage (a year or more) and underwater (some over $100,000.00) and homeowners who are only a payment or two behind and not that far underwater. I have dealt with most of the major banks like Chase, Bank of America, Wells Fargo, US Bank and some smaller lenders like Ocwen, Green Tree, and Real Time Resolutions, etc.
Through my experience, I cannot help but notice that the way HAMP is described in the federal guidelines and informational brochures handed out by banks does not give a homeowner an accurate description of how the process actually works. I have been through the process numerous times so I decided to share an inside view on how the process actually goes. I think you will find that you are not alone in feeling frustrated by the process. I hope by sharing my experiences with the process I can help alleviate some of those frustrations.
Starting Out
Let’s say that you are behind on your mortgage payments and will likely not be able to make up the missed payments or continue to make payments at your current amount. Your debts are rising and your income is not. Maybe you have been hit by unexpected expenses like medical bills or necessary auto or home repairs. After missing a few payments (typically after your second or third missed payment) your bank will send you a letter stating that you have “alternatives to foreclosure” and listing a modification, short sale and deed-in-lieu of foreclosure as your options. You don’t like the sound of a short sale or deed-in-lieu (because this results in you losing your home) so you opt for a loan modification which, in most cases, is HAMP.
Right off the bat it is important to keep in mind that most banks have one department that works on modifications and one that works on foreclosures (which cover short sales and deeds-in-lieu). Do not assume that these departments talk to each other! As you go through the process of applying for a modification (which can take several months) the foreclosure department will continue to send you letters stating that you should look into a short sale or deed-in-lieu. Do not be alarmed. It is typical for the two departments not to share information or update each other on the status of your account. That is, the foreclosure department will not always be savvy to your loan modification application being processed. As long as the foreclosure department does not send you a Notice of Default or Notice of Trustee’s Sale, they have not set a foreclosure sale date and you do not need to worry. If you are concerned ask your account representative if a foreclosure sale date has been set. If a sale date is set, contact your attorney immediately.
The HAMP Application and Supporting Documents
To apply for HAMP, call the number on the “foreclosure alternatives” letter. You will reach someone in a call room. You will have to give your name, address, and last four of your social security number to verify your account. Get used to this; you have to do it every time you call.
This person will not know much about your particular situation and will not be all that helpful. You can give them your email address and they will email you a HAMP application. Make sure it is the new 7-page application and not the old 4-page application. I have had bank representatives send me the wrong application and this delays the process. I would suggest skipping the call and downloading the form directly from here. If you do this make sure to verify that your bank does not require any additional application paperwork.
The HAMP application will ask you basic information about you, any co-borrower, if you currently occupy the home, if you want to keep the home, and your income and expenses. Make sure you include all sources of income including rental payments, social security, disability, welfare, etc.
They HAMP application will also ask for supporting documentation. This typically includes:
Income Tax Return (make sure you physically sign page 2 – electronic signatures are not accepted)
Two consecutive bank statements (within the last 60 days)
Two consecutive pay stubs (within the last 60 days and listing employer, all deductions, pay period, etc.)
Dodd-Frank Certification (signed and dated)
4506T Form (signed and dated)
Hardship Letter (signed and dated – a page will do but be specific as possible and include the dates the hardship(s) occurred)
Social Security Award Letter (if applicable)
Food Stamps Award Letter (if applicable)
Proof of Receipt of Child Support Payments (if applicable)
Rental Agreement (send in this if you are renting out space and receiving payments, not if you are the tenant)
Third Party Authorization From (if you are represented by an attorney)
Once you have completed the HAMP application fax it, along with the supporting documentation, to the fax number listed. Fax it twice or more to make sure they get it. Also email and mail it. If this sounds ridiculous, it is. However, every bank I have ever worked with has said, at some point, that they did not receive all the required documentation and requested I resend it. I try to give them no excuse by sending it to every contact I have. Make sure you keep thorough records of all your correspondence.
A few notes on the supporting documentation: First, make sure you sign and date everything. Second, the bank statements and paystubs must be dated within the last 60 days. Often, by the time the file is compiled and sent to the underwriters, the bank statements and paystubs will be out of date. Instead of waiting for the representative to call you and ask for updated paystubs and bank statements, or worse yet, send you a letter denying your modification, I advise faxing in each and every paystub and bank statement you receive until your modification is approved. Lastly, if anything at all is out of the ordinary about your income or expenses prepare to write a signed and dated letter explaining it. That is, if you do not have paystubs because you are self-employed, prepare to write a letter. If you get paid on commission or on a job-by-job basis, and not regularly, prepare to write a letter. The bank representatives have no imagination and will request a letter explaining every little aspect that deviates in any degree from their script. I generally ask people for these letters of explanation up front instead of waiting for the rep to ask for them.
The Waiting
After you have submitted and clarified the documents, the file will be “sent to the underwriters.” These are the people who ultimately decide if your loan modification will be approved or not. You never get to talk to these people. You never even get their names. The bank representatives do not even know. Why the mystery I do not know but this no-contact order with the decision-maker only serves to complicate the process. Instead of calling you or your legal representative directly when they have a question, the underwriters will note the file send it back to the account representative who will call you, note the file and send it back to the underwriter. This takes several days for each step.
Once your application is in the hands of the underwriters, they will take anywhere from 30 days to several months to review your file. During this time I would advise continuing to update your bank statements and paystubs. The underwriters will often ask for clarification on income or expenses as well so be prepared to provide this. As mentioned above this process of addressing the concerns of the underwriters takes time.
I advise calling every week to check in regarding the status of your loan. This is because the underwriters may ask for additional documentation but your account representative may not relay this to you. If the underwriter’s request slips through the cracks, it is possible that they will deny your application for “insufficient documentation” and you’ll have to start the process all over again. The rep may sound annoyed at your constant inquiries but I have found it pays off in the long run to stay on top of things.
Decision Time
After several months of waiting the underwriters will eventually make a decision on your file. If you are approved, they will send you a letter stating your new payment and the date and month to start making these payments. This payment should be roughly 31% of your monthly gross household income. You will have to make three “trial payments.” If you make these three trial payments on time your modification will be permanently approved. They will send you a thick packet of documents that you will need to review, sign and return to their offices within a certain timeframe to finalize the permanent modification.
It is absolutely crucial that you make all three of these payments on time. If you miss one payment your HAMP application will be rejected and they will NOT reconsider you for a modification no matter how hard you beg. You CAN make all three payments, permanently modify your loan, then miss a payment and reapply for HAMP. Unfortunately, if you miss one of the actual trial period payments you are done.
If your HAMP application was denied your options depend on the reason for the denial. Often this will be stated in the denial letter sent by your bank but this is not always the case. Several times I have had to call in to the account reps to inquire why a modification was denied. Often the reps will not know (their screens typically just shows the fact of the denial and not the underlying reason) so you will have to pester them ask their manager.
If you find out that the HAMP modification has been denied because of “insufficient documentation” then you can simply reapply and/or just send in the required documentation. This often happens even if you have been diligent and sent in everything they asked for.
If your modification has been denied because of another reason, let’s say your income is too low or too high (remember they adjust modification payments to 31% of your gross income so if you make really good money your payments often increase in which case the bank will deny your application) or your debt-to-income ratio is not between 30% to 40%. If your situation changes, you may reapply for HAMP. If not then you may want to consider your other foreclosure alternatives.
In Closing
This is a frustrating process. I have done dozens of modification and not one has been pleasant. Banks are understaffed and unprepared to deal with the amount of modifications being asked for. Despite repeated warnings and even lawsuits by regulatory agencies, they have not gotten any better at dealing with modifications in a user-friendly, streamlined fashion.
My advice is to plague them with emails, calls, faxes and documentation from the day you apply to the day your modification is approved. Do not rely on any written or oral promises until you have the modification paperwork signed, accepted and in your hand. If your HAMP application gets denied, find out why and reapply. If you do not qualify for HAMP ask if they can do an in-house modification. If they refuse, look into your other foreclosure alternatives. Be persistent and unrelenting! Your hard work WILL pay off.
Good luck and call me if you need any help!
Legal Disclaimer: The information on this page does not constitute legal advice and should not be relied upon as each situation is fact specific and it is impossible to evaluate a legal problem without a comprehensive consultation and review of all the facts and documents at issue. The information on this page is solely for the purpose of legal education and is intended to only provide general information about the matters stated therein. The information on this page should not be used as a substitute for competent legal advice from a licensed attorney that practices in the subject area of the matters stated therein. No attorney-client relationship is formed without an actual agreement confirmed in writing. I am licensed only in Washington.